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Why Cornerstone Building Brands Stock Is Up Today

By Lou Whiteman - May 13, 2021 at 11:20AM

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A Wall Street analyst says the company should benefit from an uptick in housing and renovation demand.

What happened

Shares of Cornerstone Building Brands (CNR) jumped more than 10% on Thursday morning on a Wall Street analyst upgrade. Demand for housing is strong right now, and Cornerstone is benefiting.

So what

On Tuesday evening, Cornerstone delivered better-than-expected first-quarter results, earning $0.03 per share on revenue of $1.27 billion when a $0.06-per-share loss on $1.2 billion was expected. Net sales and adjusted earnings both hit record highs thanks to strong residential end-market demand for the company's windows, siding, and other exterior building products.

A house in the early stages of construction

Image source: Getty Images.

Despite the good quarter, the stock traded down on Wednesday, perhaps caught up in a broader market sell-off. But Thursday morning is a different story for both the market averages and Cornerstone shares specifically.

D.A. Davidson analyst Brent Thielman upgraded Cornerstone shares to a buy from neutral and raised his price target to $18 from $14. In a note, Thielman said that the quarter gave him more confidence that the company will be able to benefit from elevated residential demand. He also praised its efforts to deleverage its balance sheet.

Now what

Cornerstone expects to generate second-quarter revenue of $1.375 billion to $1.425 billion, ahead of Wall Street's pre-earnings $1.29 billion consensus. Strong demand from new housing construction and renovation is expected to continue, though there are some concerns about shortages in materials including lumber slowing down homebuilders.

As Thielman noted, the company is also working to improve its balance sheet, with net debt falling to 4.6 times earnings at the end of the quarter from 5.2 times a year prior. But Cornerstone remains in expansion mode, earlier this month acquiring Prime Window Systems to expand its vinyl window and door offerings.

The stock is up 229% in the past year, more than double the gains posted by the SPDR S&P Homebuilders ETF. But as long as homebuilding and renovation demand remains strong, there is no reason Cornerstone shares can't keep up their momentum.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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